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Bitcoin ETFs were a hit with investors in 2024, and now asset management firms are starting to develop ways to combine crypto and derivatives in exchange-traded packages.
New products should be introduced this month. Asset manager Calamos announced on Monday that it will launch a structured hedge ETF which aims to give investors a way to capture some of the benefits of bitcoin with 100% downside protection.
The fund will combine exposure to options on the Cboe Bitcoin US ETF Index with Treasury holdings and is designed to hold for 12 months. The exact cap will be determined on January 22, based on option prices. It will be traded under the symbol CBOJ.
The fund essentially brings the popular equity ETF strategy to crypto investing. Defined outcome products, incl buffer fundshave flourished in recent years as investors look for new ways to diversify their portfolios. Their rise in popularity appears to have been aided by the 2022 market sell-off, when both stocks and bonds fell.
Spot bitcoin funds launched in January 2024 and had arguably the best debut in ETF history. Funds have come together to raise tens of billions of dollars and help fuel bitcoin’s run to a record high above $100,000.
Bitcoin has rallied strongly since ETFs tracking the cryptocurrency were approved last January.
Inflows and crypto rally fueled iShares Bitcoin Trust ETF (IBIT)the most popular among funds, over 50 billion dollars in total assets.
However, Matt Kaufman, head of ETFs at Calamos, said his team believes financial advisers still largely avoid bitcoin because of its history of volatility, and that these structured funds can win them over.
“People who want to access that space, they want to do it in a risk-managed framework or something that makes a little more sense for their portfolio,” Kaufman said. He also thinks investors will hold the Calamos fund alongside pure-play bitcoin ETFs.
Calamos isn’t the only ETF manager working on how to combine cryptocurrency exposure with other popular fund styles.
Innovator and Trust first are two other ETF issuers that have applied to launch funds with strategies similar to those of Calamos. Firms are also trying to combine bitcoin with income-generating strategies, including proposed issuer covered call funds such as Gray tones and Roundhill.
More funding is likely to be filed throughout 2025, especially with the Securities and Exchange Commission expected to be friendlier to cryptocurrencies under President-elect Donald Trump.
How it works
Calamos’ fund is designed to be held over a 12-month period. The specified holding period is from January 22, 2025 to January 31, 2026. Because exposure to bitcoin is built through options, the price of which changes as their expiration date approaches, it is possible that investors who sell the fund early will receive less than expected gains from bitcoin’s growth and could even suffer a loss.
Calamos Bitcoin Structured Alt Protection ETF – January
| Ticker | Holding period | Target downside protection | Annual fee |
|---|---|---|---|
| CBOJ | 22.1.2025-31.1.2026 | 100% | 0.69% |
Source: Calamos
Calamos also plans to launch “floor” funds that offer 90% and 80% protection for bitcoin, allowing some initial losses in exchange for more gains.
Kaufman said the structure of bitcoin products that work will likely look different from traditional buffers, which protect against the loss of the first stated percentage, due to the crypto’s volatility.
“If you look at the returns of the S&P 500, it looks like a normal bell curve distribution. If you look at the distribution of bitcoin returns, it looks more like a smile. It’s all left-tail or far-right upside risk. So if you’ve built a buffer, you’re not really hedging of what,” Kaufman said.
Another thing to watch is how the options market grows along with the funds. Options linked to bitcoin ETFs did not start rolling out until late 2024. Options liquidity issues affected performance funded assets associated with MicroStrategywhich is often considered a proxy for bitcoin.
“We don’t have any capacity concerns,” Kaufman said of the options market for Calamos funds.
